The Signs Are Good for Cable SMB Initiatives

Carl Weinschenk

A consistent subtext for the cable industry during the past 20 years is that it is well positioned to be a major provider of small and medium-sized business (SMB) services. It's not all talk, either. Cox Business and Lightpath, a division of Cablevision Systems Corp., are two examples of thriving cable-based providers of business services.

 

SMBs have always been seen as a good cable target; they have traditionally been underserved by the phone industry because of high acquisition costs and the disparity in knowledge between telco engineers, who are accustomed to dealing with enterprise technical experts, and the relatively low telephony sophistication of SMBs.

 

Changes in the landscape may be driving SMBs more strongly toward the cable tent. The cable industry, with its consumer roots, is better positioned to draw business from these small fry. This Broadcasting & Cable column says Comcast is predicting 20 percent penetration -- $12 billion to $15 billion in revenue -- from the commercial sector during the next five years. The prediction, made by co-chief financial officer John Alchin at a recent investors conference, is based on a $3 billion investment. The story reports that Time Warner Cable sees a $9 billion commercial market in its service area, with most of that -- $6 billion to $7.5 billion -- being from voice services.

 

This Investor's Daily piece is similar in tone. The writer says small business in the U.S. spent $16 billion on wireline voice during 2006. This year, cable took 1 percent of business lines. By 2011, the cable guys can hike that total to 8 percent -- and 30 percent of the very small business lines. The story mentions what Cox, Time Warner Cable and Comcast are doing or plan to do in business services.

 

This is an exhortation/tutorial that suggests the cable industry could serve a purpose -- and make a lot of money -- by providing phone systems to small businesses. The rationale, according to Communications Technology writer Justin Junkus, is that small businesses don't want to worry about their telephone networks.


 

The writer says there are network- and premises-based platforms. The latter category, in turn, is split into systems that rely on a single computer to manage a number of lines or fully featured phones that link together. The bottom line, Junkus says, is that the industry would be filling a void by simplifying things for this class of customer.

 

This Telecommunications Online feature does a nice job of mapping cable's move into the higher end of the SMB spectrum. The ability to go after the upper sector of the continuum -- as well as enterprises -- is part and parcel of the industry's move to metro Ethernet services. The piece says the industry is making its presence felt in the Metro Ethernet Forum (MEF) and points out that success will require a level of service that it generally isn't called on to offer to consumers.

 

The industry must also rehabilitate its reputation, which still isn't too good. The reality is that as the companies the cable industry goes after get bigger and more national in scope, the demands will be more exacting and the competition from incumbents tougher.

 

It certainly won't be smooth sailing. For instance, PhyFlex, a cable industry-based vendor that marketed Ethernet-based architectural approaches that would enable cable operators to offer high-capacity connectivity to business, last month sold its assets to Ciena. This was no shoestring startup: Multichannel News says the company, founded in 2000 as Narad Networks, had garnered more than $100 million from investors.



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